vengabeats
Nilesh Nagdev
Bharti Airtel
Research: JM Morgan Stanley
Recommendation: Overweight
CMP: Rs 385 (Face Value Rs 10)
12-Month Price Target: Rs 482
Bharti registered a YoY and sequential growth of 53.2% and 13.0% in sales, respectively, and 59.7% and 17.5% in EBITDA. A higher interest cost burden led to a slower net profit growth of 48.1% YoY and 10.7% sequentially. EBITDA and net profits were 5.4% and 2.4% ahead of expectations.
For the quarter, the company added 3.49m wireless subscribers, a 7.4% sequential and 174.6% YoY increase in net additions. Its overall wireless subscriber base stood at 23.07m subscribers, with a market share of 20.64%, up 75 bps sequentially. Bharti accounted for an impressive 26.2% of the overall wireless net additions in the country this quarter.
Bharti has underperformed the market by 2% YTD, and based on FY08E earnings, it shares are trading at an all-time low P/E relative to the market of 1.24 times, making valuations look attractive. JM Morgan Stanley projects Bharti’s FY06-08 operating and net profit growth at 42% and 40% pa respectively.
Potential upside triggers include: (a) implementation of the hike in telecom companies’ foreign holding limit from 49% to 74%; (b) high net additions; (c) government lowering its revenue share; (d) strong quarterly results, and (e) Bharti turning FCF (free cash flow) positive.
Larsen & Toubro
Research: Enam Securities
Recommendation: Outperformer
CMP: Rs 2,182 (Face Value Rs 2)
12-Month Price Target: Rs 2,550
Larsen & Toubro’s Q1 FY07 net profit was largely in line with the expectations. However, topline performance was disappointing, which was primarily due to projects not reaching threshold level of revenue bookings.
The company declared revenues of Rs 3,480 crore (up 12% YoY), EBIDTA of Rs 240 crore (up 63% YoY) and adjusted. PAT of Rs 160 crore (up 50% YoY) during Q1 FY07. Strong growth in order intake (up 90%) and margin expansion (up 220 bps) is discernible across all businesses.
Growth trajectory in the E&C business remains intact, as the company posted a 121% increase in new orders at Rs 6,330 crore, driven by hydrocarbon and industrial segments. EBIT margin improved by 333 bps to 7.6% as large number of infrastructure projects (received in Q4FY05) are nearing completion.
Higher realisation, operating efficiency and cost rationalisation led to margin expansion across businesses - electricals (up 349 bps), MIP (up 752 bps) and others (up 66 bps). At the current market price, the stock trades at 10.7 times FY07E EV/ EBIDTA.
Mastek
Research: Edelweiss
Recommendation: Buy
CMP: Rs 352 (Face Value Rs 5)
12-Month Price Target: NA
Mastek’s Q4 FY06 results were marginally ahead of expectations. Its revenues grew 6.6% QoQ and 23.7% YoY to Rs 190 crore, and net profit grew 18.9% QoQ and 39.8% YoY to Rs 20.6 crore Gains on account of rupee depreciation against GBP, accounted in other income, aided the net profit growth.
The company has strong traction from its top 10 clients who account for 85% of its FY06 revenues. The order book stands unchanged QoQ at Rs 380 crore, but is up by 41% on YoY basis. Mastek expects stronger growth from its underperforming US geography.
The company’s success in this initiative will be positive for margins. Edelweiss continues to remain concerned about the client concentration levels and continued decline in the number of active clients.
While Mastek’s dependence on its top 10-15 relationships remains a matter of risk, its long-term relationship with these clients and its high wallet share with them offer some respite.
Rallis India
Research: Emkay Shares
Recommendation: Buy
CMP: Rs 252 (Face Value Rs 10)
12-Month Price Target: Rs 291
For Q1FY07, Rallis has performed better in terms of sales (up by 5.65%). However, EBITDA has fallen by 9.43% in absolute terms while EBIDTA margins have fallen by 114 bps to 6.8%. APAT after the notional loss is minus Rs 3.8 crore.
The industry is expected to show at least 10% growth this year; the initial reports of monsoon are quite satisfactory and the company’s performance in seeds business and international business are quite impressive.
Emkay Shares expects EBITDA margin to expand to 9.4% for FY07E. Rallis will show an EPS of Rs 20.8 after charging for the notional loss.
At No 2 position in the industry, Rallis looks quite attractive at Rs 239, 11.9 times FY07E earnings, considering its experienced management, its ability to introduce new products, nationwide marketing reach and ability to bring alliances. Due to the notional loss on foreign liabilities, the estimated EPS for FY07E has reduced from Rs 25.9 to Rs 20.8.
Satyam
Research: Angel Broking
Recommendation: Buy
CMP: Rs 737 (Face Value Rs 2)
12-Month Price Target: Rs 962
Satyam has clocked another quarter of robust growth in excess of 35% in topline and 85% in bottomline. It has been an all-round performance with growth coming from across verticals and services.
Satyam’s Enterprise Solutions and Consulting practice outperformed the company’s growth, as it grew by 46.7% YoY to account for 40.2% of the revenues in the quarter under review.
The company managed a volume growth of 7.2%, while the billing rates improved by 0.54% for onsite and by 0.52% for offshore YoY. It has successfully increased its $10m clients from 27 to 33 in the quarter.
It also increased its active client base to 489 from 469 in the previous quarter. Angel expects Satyam to grow by over 39% in revenues and over 33% in earnings for FY07 (earnings growth excludes the Sify stake sale proceeds in FY06) as the business momentum is intact.
Orient Paper
Research: Anand Rathi Securities
Recommendation: Buy
CMP: Rs 388 (Face Value Rs 10)
12-Month Price Target: Rs 480
Orient Paper’s results for the first quarter of FY07 continue to be on track, recording a topline growth of 28.6% to Rs 258 crore mainly on the back of sound growth in both the cement and paper divisions. Bottomline grew superbly from Rs 2.6 crore to Rs 25.7 crore for the quarter.
The capacity is expected to be on stream by the end of the current financial year. Given the present trend and the first quarter FY07 numbers, the EPS for the current financial year is estimated to be around Rs 60 per share. This is on the back of an EBIDTA margin of 19% for the full year (first quarter EBIDTA margin at 21.1%) and full year FY06 EBIDTA margin of 12.2%.
Not only this, there are couple of other positive triggers viz - holding of huge property at Bajarangnagar worth Rs 100 crore, which is likely to be sold. The company also holds investments worth Rs 80 crore in its balance sheet.
Also the stock is trading at 6.4 times its projected earning of Rs 60 per share offering reasonable capital appreciation potential at just 10X discounting, which is minimum for the cement sector.
Source : ET
Research: JM Morgan Stanley
Recommendation: Overweight
CMP: Rs 385 (Face Value Rs 10)
12-Month Price Target: Rs 482
Bharti registered a YoY and sequential growth of 53.2% and 13.0% in sales, respectively, and 59.7% and 17.5% in EBITDA. A higher interest cost burden led to a slower net profit growth of 48.1% YoY and 10.7% sequentially. EBITDA and net profits were 5.4% and 2.4% ahead of expectations.
For the quarter, the company added 3.49m wireless subscribers, a 7.4% sequential and 174.6% YoY increase in net additions. Its overall wireless subscriber base stood at 23.07m subscribers, with a market share of 20.64%, up 75 bps sequentially. Bharti accounted for an impressive 26.2% of the overall wireless net additions in the country this quarter.
Bharti has underperformed the market by 2% YTD, and based on FY08E earnings, it shares are trading at an all-time low P/E relative to the market of 1.24 times, making valuations look attractive. JM Morgan Stanley projects Bharti’s FY06-08 operating and net profit growth at 42% and 40% pa respectively.
Potential upside triggers include: (a) implementation of the hike in telecom companies’ foreign holding limit from 49% to 74%; (b) high net additions; (c) government lowering its revenue share; (d) strong quarterly results, and (e) Bharti turning FCF (free cash flow) positive.
Larsen & Toubro
Research: Enam Securities
Recommendation: Outperformer
CMP: Rs 2,182 (Face Value Rs 2)
12-Month Price Target: Rs 2,550
Larsen & Toubro’s Q1 FY07 net profit was largely in line with the expectations. However, topline performance was disappointing, which was primarily due to projects not reaching threshold level of revenue bookings.
The company declared revenues of Rs 3,480 crore (up 12% YoY), EBIDTA of Rs 240 crore (up 63% YoY) and adjusted. PAT of Rs 160 crore (up 50% YoY) during Q1 FY07. Strong growth in order intake (up 90%) and margin expansion (up 220 bps) is discernible across all businesses.
Growth trajectory in the E&C business remains intact, as the company posted a 121% increase in new orders at Rs 6,330 crore, driven by hydrocarbon and industrial segments. EBIT margin improved by 333 bps to 7.6% as large number of infrastructure projects (received in Q4FY05) are nearing completion.
Higher realisation, operating efficiency and cost rationalisation led to margin expansion across businesses - electricals (up 349 bps), MIP (up 752 bps) and others (up 66 bps). At the current market price, the stock trades at 10.7 times FY07E EV/ EBIDTA.
Mastek
Research: Edelweiss
Recommendation: Buy
CMP: Rs 352 (Face Value Rs 5)
12-Month Price Target: NA
Mastek’s Q4 FY06 results were marginally ahead of expectations. Its revenues grew 6.6% QoQ and 23.7% YoY to Rs 190 crore, and net profit grew 18.9% QoQ and 39.8% YoY to Rs 20.6 crore Gains on account of rupee depreciation against GBP, accounted in other income, aided the net profit growth.
The company has strong traction from its top 10 clients who account for 85% of its FY06 revenues. The order book stands unchanged QoQ at Rs 380 crore, but is up by 41% on YoY basis. Mastek expects stronger growth from its underperforming US geography.
The company’s success in this initiative will be positive for margins. Edelweiss continues to remain concerned about the client concentration levels and continued decline in the number of active clients.
While Mastek’s dependence on its top 10-15 relationships remains a matter of risk, its long-term relationship with these clients and its high wallet share with them offer some respite.
Rallis India
Research: Emkay Shares
Recommendation: Buy
CMP: Rs 252 (Face Value Rs 10)
12-Month Price Target: Rs 291
For Q1FY07, Rallis has performed better in terms of sales (up by 5.65%). However, EBITDA has fallen by 9.43% in absolute terms while EBIDTA margins have fallen by 114 bps to 6.8%. APAT after the notional loss is minus Rs 3.8 crore.
The industry is expected to show at least 10% growth this year; the initial reports of monsoon are quite satisfactory and the company’s performance in seeds business and international business are quite impressive.
Emkay Shares expects EBITDA margin to expand to 9.4% for FY07E. Rallis will show an EPS of Rs 20.8 after charging for the notional loss.
At No 2 position in the industry, Rallis looks quite attractive at Rs 239, 11.9 times FY07E earnings, considering its experienced management, its ability to introduce new products, nationwide marketing reach and ability to bring alliances. Due to the notional loss on foreign liabilities, the estimated EPS for FY07E has reduced from Rs 25.9 to Rs 20.8.
Satyam
Research: Angel Broking
Recommendation: Buy
CMP: Rs 737 (Face Value Rs 2)
12-Month Price Target: Rs 962
Satyam has clocked another quarter of robust growth in excess of 35% in topline and 85% in bottomline. It has been an all-round performance with growth coming from across verticals and services.
Satyam’s Enterprise Solutions and Consulting practice outperformed the company’s growth, as it grew by 46.7% YoY to account for 40.2% of the revenues in the quarter under review.
The company managed a volume growth of 7.2%, while the billing rates improved by 0.54% for onsite and by 0.52% for offshore YoY. It has successfully increased its $10m clients from 27 to 33 in the quarter.
It also increased its active client base to 489 from 469 in the previous quarter. Angel expects Satyam to grow by over 39% in revenues and over 33% in earnings for FY07 (earnings growth excludes the Sify stake sale proceeds in FY06) as the business momentum is intact.
Orient Paper
Research: Anand Rathi Securities
Recommendation: Buy
CMP: Rs 388 (Face Value Rs 10)
12-Month Price Target: Rs 480
Orient Paper’s results for the first quarter of FY07 continue to be on track, recording a topline growth of 28.6% to Rs 258 crore mainly on the back of sound growth in both the cement and paper divisions. Bottomline grew superbly from Rs 2.6 crore to Rs 25.7 crore for the quarter.
The capacity is expected to be on stream by the end of the current financial year. Given the present trend and the first quarter FY07 numbers, the EPS for the current financial year is estimated to be around Rs 60 per share. This is on the back of an EBIDTA margin of 19% for the full year (first quarter EBIDTA margin at 21.1%) and full year FY06 EBIDTA margin of 12.2%.
Not only this, there are couple of other positive triggers viz - holding of huge property at Bajarangnagar worth Rs 100 crore, which is likely to be sold. The company also holds investments worth Rs 80 crore in its balance sheet.
Also the stock is trading at 6.4 times its projected earning of Rs 60 per share offering reasonable capital appreciation potential at just 10X discounting, which is minimum for the cement sector.
Source : ET